TICKY FULLERTON, PRESENTER: I'm joined now from Singapore by long-time euro watcher Grant Williams, strategy advisor for Vulpes Investments - a hedge fund with global interests - and he also writes the investment newsletter Things That Make You Go Hmmm.

Grant, welcome to the program again.

GRANT WILLIAMS, VULPES INVESTMENTS: Hi, Ticky.

TICKY FULLERTON: Now, we see the euro markets have gone south, a four-month low, as we mentioned at the top of the program. European finance ministers meet later today. Presumably they will be talking about a scenario of Greece leaving the euro.

GRANT WILLIAMS: Well, Greece is back. I mean, it was a couple of months ago it was contained, the problem was solved, but it never really went away as we've - we've talked about this before. And funnily enough, it was a political will that kept this thing together and it's now turning out to be politics that's tearing this thing apart, what with some of the elections we've seen and incumbent governments getting kicked out.

And for the first time we've seen a lack of solidarity of message from a lot of the guys involved. We've had Prodi, the previous EU commission chief saying, "The whole of Europe's a house of cards." In Germany we've had Schaeuble say that Germany will suffer more inflation and we've had the head of the Bundesbank saying, basically, "No, we won't. Not on my watch." So, it's starting to come apart at the edges and the implications of that are very, very bad indeed.

TICKY FULLERTON: What I found quite bizarre is that the euro itself is quite strong. I mean, that would indicate that markets are perhaps not quite as skittish, wouldn't it?

GRANT WILLIAMS: It's hard to say. I mean, we've seen over the last two years not only in Europe, but in many other problems of the world's been facing that nothing seems to matter to anybody until it matters to everybody. And we can see - we could possibly see the euro go materially lower. I certainly would expect to see that.

If Greece does as, I have expected for a long time now, exit the euro, the knock-on effect for the rest of the periphery could be very serious indeed. A lot of people are expecting the euro to possibly strengthen if Greece either leaves or is politely shown the door.

But there's a distinct possibility that the chance of contagion to some of these other peripheral countries sends the euro lower, materially lower.

TICKY FULLERTON: You mentioned Romano Prodi talking about the house of cards. I think he mentioned Portugal, Spain, Italy, France. But we've now actually got some of the top economists - Paul Krugman, Nouriel Roubini - they're also talking about a Greek exit now. I mean, it seems to me that the weight of opinion is actually moving in this direction.

GRANT WILLIAMS: Well, all the way through this process I've been a great believer that you either back mathematics or you back politicians. The laws of mathematics can't be refuted. Politicians can normally be relied upon to do the wrong thing at the wrong time. And that's what we've seen. We've seen a lot of political moves with the best of intentions to try and pull something together, but underneath it, the debt dynamics, the numbers just don't work.

So you can have the best will in the world to try to keep the eurozone together, but ultimately it's crumbling under the weight of debt. And they're not numbers that you can just make go away by trying to hold the whole thing in one piece.

TICKY FULLERTON: The other thing that's also impacting us down here in Australia of course is China, and while that has a knock-on in terms of what's happening with Europe - China obviously having a very close relationship with Europe.

I think for the third time in six months China has cut the reserves that its banks must hold by 0.5 per cent. How serious is this in terms of contributing to the type of landing that China might be facing now?

GRANT WILLIAMS: Well we saw last week, we see a whole slew of economic data come in weaker than expected, which certainly set some alarm bells ringing. But I think this move just shows that China does have plenty of ammunition left. They can lower rates, they can adjust the reserve ratio requirements. There are things they can do to try and soften the landing.

I don't think there's any doubt that China is certainly going to come in for some kind of landing. The Goldilocks scenario was what the West was looking for a couple of years ago. It didn't happen. China - it could still go either way. You and I spoke about this before. It could go either way; you could make a case for both.

And I think, when I look at Chinese steel prices hitting four-month lows, iron ore prices below $140 a tonne for the first time since February - do you think those sort of prices are going to return to the highs that were earlier in the year?

GRANT WILLIAMS: That's a big ask. And obviously for Australia, it's very, very important. Some 46 per cent of Aussie exports go to China and the bulk of that is iron ore and coal. So, it's a tough call to see them returning to their old highs.

I think the best you can hope for is they stabilise around here and maybe form a base and then try and work their way higher. Inflation is certainly going to help that.

TICKY FULLERTON: Just going back to Europe for one second, because I see the European Union's economic committee is meeting today to look at the cap on - capping bank bonuses now and the likelihood is that they will cap those bonuses at just your existing salary, in other words, one for one.

That presumably is going to have quite a serious impact on London as a financial centre, isn't it?

GRANT WILLIAMS: It will do, but again, it's populist politics. And attacking bankers has become a very good way to win votes and a good way to get people behind you. The banking industry, make no bones about it, is undergoing a seismic change and the days we've seen in the last 10 years are gone possibly forever.

I mean, there are changes on the buy side with hedge funds, there are changes in investment banks and they're negative for bankers, but they play very, very well on a political stage.